12 Oct

U Shareholder Agreement

Shareholder agreements have a large number of provisions that focus on (a) who makes decisions regarding the management and operation of the business and (b) can be transferred, distributed and sold as shares. This should normally include a shareholders` agreement: reduced to its essential elements, a unanimous shareholders` agreement is a contract concluded between all shareholders and which limits the directors` shares. While it does not limit the actions of the directors, it is not a unanimous shareholders` agreement, even if it is a unanimous agreement of all shareholders. Confusing? No doubt, but the thing to remember is that the unanimous shareholders` agreement is an artistic term that specifically relates to agreements entered into under section 146 of the Canada Business Corporations Act and nothing else. This model shareholders` agreement is not suitable for two shareholders who both hold 50% of the shares. In this situation, there must be a detailed provision to resolve the impasse, which requires specific preparation. Each party should seek its own legal advice before entering into such an agreement. A unanimous shareholders` agreement is an agreement shared among all shareholders, which limits the powers of directors in the management and operation of the company. Depending on the jurisdiction in which your company is founding, the agreement is a contractual agreement imposed by the Canada Business Corporations Act or the Business Corporations Act (Ontario) that allows shareholders to unanimously exempt directors from some or all of their management powers. It is not necessary for a shareholders` agreement to contain specific information or to always deal with a given issue. Indeed, a shareholders` agreement can cover a whole series of subjects or only one. What happens when a shareholder dies? There should be a fair way for surviving shareholders to acquire (optionally or compulsorily) shares in the estate of the deceased shareholder. The company should have life insurance in order to be able to finance such buyouts.

It is a good idea to also get specialized advice in tax accounting in this area. What is the importance given to actions? Options: external valuation expert (expensive and unpredictable) or encourage shareholders to agree on a value and attach it to the agreement as a schedule (updated regularly) or using a formula (multiple of profits or sales, book value, etc.) or a combination of those mentioned above. If the shareholders` agreement and the articles of association have been properly prepared, there should be no contradiction between their respective provisions. . . .